Earlier this week, Apple was slapped with a record $14.5 billion tax penalty by the European Commission on Tuesday for its agreements with Ireland. After a few days of deliberation, the country will back Apple and appeal the ruling.
But it’ll face a tough opponent in the Commission, whose president, Jean-Claude Juncker, said Sunday that the ruling against the tech giant was clearly based upon facts and rules. His sentiments were echoed by director of the OECD Center for Tax Policy and Administration, Pascal Saint-Amans, who called Apple’s tax planning “outrageous,” and insisted that the decision was rooted in regulations.
“This is not a decision against the United States of America,” said Juncker.
Ireland’s corporate tax rate is 12.5 percent on business profits. Apple was paying far less thanks to an agreement it made with the country back in the 1990s. That deal allowed the company to record all sales in Ireland rather than “in the countries where the products were sold.” In return, Apple brought jobs to Ireland.
Ireland could either back Apple and appeal the decision, or take the $14.5 billion from the company — and according to the BBC that’s equivalent to all of Ireland’s health care budget. The company’s decision to appeal the Commission leaned more towards ensuring stability and remaining “transparent” about its taxation. The country is already home to the likes of Google, Amazon, Facebook, HP, Dell, IBM, and more — turning its back on Apple could scare other businesses away.
While the EC has deemed the agreements as illegal state aid, Apple and Ireland have repeatedly said the company “follows the law.” Ireland’s financial minister, Michael Noonan, said he “disagreed profoundly” with the Commission’s ruling that will force Apple to pay $14.5 billion in back taxes to the country, according to Reuters. Apple CEO Tim Cook said the decision was “maddening” and “political.”
The penalty is the highest ever issued by the Commission — the previous record fine was $1.4 billion and was imposed on EDF, a French energy group.
Apple said it is also appealing the decision, and CEO Tim Cook wrote an open letter discussing the ruling. But while the executive is clearly unhappy with the enormous penalty, he said Thursday that his company might repatriate a portion of the money as early as 2017. While Cook called the Commission’s ruling “political crap,” the CEO told Irish state radio broadcaster RTÉ, “We provisioned several billion dollars for the U.S. for payment as soon as we repatriate it, and right now I would forecast that repatriation to occur next year.”
Meanwhile, the United States government is furiously looking for means to have tax money from Apple that was obtained by the European Union sent back, according to The New York Times. Congress has asked the U.S. treasury to be tougher on European officials, claiming that the European Commission is “targeting U.S. companies disproportionately.” Many representatives believe the tax Apple pays overseas belongs in the U.S. treasury.
Updated on 09-02-2016 by Lulu Chang: Added statement from European Commission President Jean-Claude Juncker
Updated on 09-02-2016 by Julian Chokkattu: Added news that Ireland will appeal the decision.
Article originally published on 08-31-2016.